Tesla’s Model Y debuts in India priced at a hefty $70,000 as the EV maker 'tests the waters'

Tesla has made its long-awaited debut in India, where it will sell its electric SUV, the Model Y, starting at $69,770, a significant markup from other major markets, its website showed Tuesday.

The sales launch comes the same day the American electric vehicle maker opened a showroom in Mumbai, its first in the country.

Isabel Fan, Southeast Asia Director at Tesla, also announced that the company would soon launch a showroom in the Indian capital of New Delhi, according to a report from CNBC-TV18.

The report added that Tesla would hire staff locally and set up experience centers, service centers, delivery systems, charging stations and logistics hubs throughout the country.

There has long been speculation about when Tesla would enter India, the third-largest automotive market in the world by sales. However, the high price tag may come as a surprise to many. For example, the Model Y starts from $44,990 in the U.S.

Vaibhav Taneja, Tesla's Chief Financial Officer, in April, confirmed the company's interest in India but said it would take a careful approach to the market considering its 70% tariff on EV imports and about 30% luxury tax.

These high taxes explain why Tesla was forced to set its prices so high in India, despite the country's preference for EVs at much lower price ranges.

Experts told CNBC that this will see Tesla in India compete in the premium segment of the market with the likes of BMW, rather than with local EV companies like Tata Motors.

"I won't say that these prices are completely out of range because you will find buyers in India for all price points," Vivek Vaidya, global client leader for mobility at research firm Frost & Sullivan, told CNBC's "Inside India" on Tuesday.

"The question is whether they are going to threaten the mass market. The answer to that is no because the most popular selling cars probably sell at one-tenth of this price," he added.

While the Model Y will struggle to be price competitive, Tesla is likely more focused on "testing the waters" than generating sales in India, Puneet Gupta, Director for the Indian automotive market at S&P Global Mobility, told CNBC.

India first announced a new EV policy last year that promised to reduce duties for companies that commit to building up a local supply chain. While this could help Tesla push its prices down, the company has yet to commit to building any local manufacturing plants in India.

"The Mumbai showroom is a strategic 'soft power' move, not a full commitment," Diwakar Murugan, automotives analyst at Canalys, told CNBC in a statement, adding that Tesla's hesitation in India is pragmatic, as the market still lacks the demand to justify a large-scale manufacturing facility.

"Shifting a significant portion of its production to India would require a major re-evaluation of its global manufacturing strategy, something it's not ready to do while its primary focus remains on scaling production in its established markets," he said.

Murugan predicted that Tesla may only commit to full-scale Indian manufacturing between 2028 and 2030, with incentives like land subsidies and tax holidays, as well as the maturity of the local battery market expected to be important factors.

In the meantime, the Model Y will be a "niche, limited-volume product for wealthy, tech-savvy early adopters who seek a status symbol," he added.

S&P's Gupta noted that India's tariffs on EV exports could also soon change as a result of ongoing trade negotiations between Washington and New Delhi, as well as further tweaks to its EV policy.

Tesla CEO Elon Musk spoke with India's Prime Minister Narendra Modi on topics including collaboration on technology and innovation in April.

"The Indian government has been very proactive in terms of pushing green, cleaner, electric cars, and I think that Tesla has a clear advantage due to the India-U.S. relationship," Gupta said.